Firm wants to diversify away from diagnostics, but law firm investigation suggests investors are unconvinced of the deal’s value

Medical diagnostics specialist Labcorp has agreed to buy contract research organisation (CRO) Covance for around $6 billion (£3.8 billion) in a mixture of cash and shares. The move allows Labcorp to diversify into the CRO marketplace to overcome sluggish performance in the diagnostics field.

The company claims that combining with Covance will allow it to offer a broader service in personalised medicine, developing both new drugs and companion diagnostic tests, as well as making clinical trials more efficient. Labcorp had already purchased one of Covance’s US genomics laboratories in February 2014.

However, investors seem to have reacted sceptically to the deal. Law firm Brower Piven, which specialises in litigation concerning mergers and acquisitions and securities fraud, has launched an investigation into the deal. The firm said it aims to determine whether Covance’s directors ‘failed to satisfy their duties to the company’s shareholders, including whether the board adequately pursued alternatives to the acquisition and whether the board obtained the best price’.

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